My name is Michael McDonald.
Today's lecture, it's
entitled Corporate Governance,
A Case Study of Freeport McMoRan.
When people think about
they generally think about it as
an intangible factor that occurs
in a company and it
helps to make the company
more attractive for investors.
But they have a hard time
putting their finger on exactly
what corporate governance is.
So it's useful anytime we're
talking about corporate governance
to start out talking about
what it is and why it matters.
Technically, corporate governance
refers to any processes
or functions that a
company has that allow
it to effectively govern itself.
That is, to make workers do what
they're supposed to do, to make
managers do what
they're supposed to do,
and to make the whole company work
for the benefit of the owners.
In the case of most
that means shareholders.
These structures that form the
core of corporate governance
are used to assign rights
to different members
of the corporation
and that helps to keep
operations running smoothly.
Again, the key here
is not that owners
or managers are bad or don't have a
seat at the table, at the company.
Everyone agrees that owners and
managers, just like customers,
are stakeholders at the company,
but companies are supposed to be run
for the benefit of their owners.
That's why they're formed and
that's the incentive that owners
have to invest capital in them.
So to the extent that corporate
governance is malfunctioning,
it undermines the functioning
of the entire economic system
because investors and owners are
less likely to contribute capital
to the upkeep of that company in the
future or to forming new companies, etc.
Thus, having good corporate
governance procedures in place
at a corporate level are critical.
And having legal structures in
place that allow companies to have
governance, that is,
those legal structures
come at a national level,
that's also critical.
The shareholders don't work
for a company directly,
so they can't necessarily
monitor employees or managers
and make sure that
they're behaving properly.
Instead, that role falls
to corporate governance.